Inflation is transitory, yet it needs to be monitored
He also said that they Fed has tried to key the market in to what it's intensions are. For all those permabulls looking for QE3, 4, 5 and 6, he said that the risks are starting to outweigh the benefits, that can roughly be translated into "Inflation outweighs the benefits of more dollar debasing". Head line inflation is like head line earnings, it doesn't mean anything. Look at gas and food prices, the Fed likes to ignore those in core CPI, but every American is pinched everyday by rising costs in both and manufacturers made clear this week that they intend to push inflation along to consumers.
This talk about inflation being transitory is a huge farce. If you understand how important t is for the Fed or someone to buy our debt, then not engaging in QE3, must have some very major risks.
I think an interest rate hike right now would scare a lot of the market and would hurt consumers, but not hiking is going to hurt consumers through price inflation. I'm already changing my driving habits and routes because the cost of gas is one of the biggest costs in my budget and I don't travel a whole lot.
SO while a few things struck me as disingenuous, transitory inflation struck me as a bold face lie.
As for the market's reaction, like I mentioned yesterday, beware the knee jerk. A lot of perma bulls will be disappointed with the statements about QE3.
As another site mentioned, watch China as well. They may be loading up a canon with trillions of dollars of US dollar denominated debt, preparing to give Bernake a broadside salute.
This whole QE thing has been an absolute mess and it's clear who's benefitted from it and who's paid the price (Wall Street and responsible savers respectively).
This may very well have been the Jackson Hole antithesis speech. Just don't rush to judgements quite yet.
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